Business Diary: February 6 - 11

By Hubert B. Herring

Published: February 13, 1994

COMPANIES A.T.& T.'s Workers Get This Message Loud and Clear With all the talk about communications, one might well think that's where the job growth would be. Far from it: Communications companies account for by far the largest share of recent job cuts. Clearly, phone companies and the like have to battle constantly over what is really a finite market: people have time for only so much communicating; they've got other things to do, like shovel snow. And to compete, of course, companies have to fit the 90's style: lean, lean, lean. In the latest dieting blitz, A.T.& T. said last week that it would cut up to 15,000 jobs, or 15 percent of its long-distance work force. Yes, the competition's brutal, but are such drastic steps necessary? One analyst, noting that over half the cuts would be white-collar jobs, said, "This is an effort to de-bureaucratize." But a union official called it "another example of a healthy company playing to Wall Street."

Big Profits (Yawn) at G.M., Ford Not long ago, if a Big Three auto maker showed any profit, the cheers were deafening. Last week, G.M. and Ford reported huge profits, and their stocks sank. What gives? Blame it on Chrysler, which a few weeks ago reported such stunning profits that anything less looked like day-old bread. So when Ford said it earned $2.5 billion in 1993, a record rebound, its stock promptly fell $1, and kept sliding to end the week at $65.50. And when G.M. followed by reporting a $2.47 billion annual profit -- and the first profitable quarter since 1989 for North American operations -- its shares dropped $1.75, ending the week at $61.125. In other words, all is forgiven -- all that cowering before the Japanese -- and investors again consider huge Detroit profits routine. Words, Words, Words (Log On) There comes a moment when those who fiercely resist the new -- whether it be talking movies or Touch-Tone phones -- are forced to admit that a corner has been turned. Such a moment came last week in the vast, disorienting migration of information from the bookshelf to the computer screen: the Encyclopedia Britannica is heading for the Internet. Yes, there's all manner of data already available by computer, but Britannica is the giant -- 44 million words, 23,000 illustrations -- so its entry cannot be dismissed lightly. It will start by offering its wares to universities and public libraries. So now, the dog that ate the homework will no doubt be replaced by a new line: "The computer's down." A (Brief) Strike at U.P.S. The teamsters may have traded an aching back for a splitting headache last week. Defying a court order, the union staged a strike against U.P.S., protesting its decision to raise the weight limit on packages from 70 pounds to a back-straining 150. The strike lasted just a day, though, as most workers refused to go along. And the company has sued the union, seeking more than $50 million in damages. What did the union get out of it? Workers will get help lifting packages over 70 pounds -- but U.P.S. says that was already policy. But the union, weakened by the strike, will have a harder time doing any heavy lifting. Paramount: Down to the Wire The bidding war for Paramount may actually end on Tuesday -- if, when the dust clears, either QVC or Viacom ends up with 50.1 percent. If it does, though, it will not be ending quietly, for last week the two sides were hurling charges back and forth about unfair bidding practices. Once again, stay tuned. Mr. Sculley's Morning After It's refreshing, in a way. Captains of industry often seem so rock solid that John Sculley's bizarre detour is a reminder that anyone can make all-too-human blunders. Mr. Sculley left Spectrum Information Technologies in a blaze of lawsuits last week, just three months after his baffling decision to join the obscure company from his lofty perch at Apple. First he sued Peter Caserta, Spectrum's president, saying he'd been deceived about accounting problems and an S.E.C. investigation. Then Spectrum promptly sued Mr. Sculley for breach of contract, and shareholders added Mr. Sculley to their suit. So, Spectrum insiders are left with millions in profits on stock they sold at prices inflated by Mr. Sculley's presence. And Mr. Sculley is left with a decidedly low-tech hangover. Cable: Too Complex to Handle? The information highway has taken on such mythic overtones as the express route to Tomorrowland that people have started waving it like a flag to head off criticism. We need big profits, the cable industry says, so we can invest in the future. The F.C.C. doesn't buy that, but that doesn't mean it can figure out how to keep rates down. In April it made rules intended to cut cable revenues by $1 billion a year, but somehow many customers' rates went up instead. Then it temporarily froze cable companies' revenue growth, hoping to come up with tough, workable rate rules. But last week, unable thus far to work out such rules, it had to extend the freeze. Has the cable business grown too complex to regulate? No More Fur for Calvin Klein On Jan. 25, members of an animal-rights group, protesting the sale of furs, entered Calvin Klein's offices, spray-painting "kills animals" under his name. Last week Mr. Klein said he would no longer produce furs, saying he'd made the decision in November. The group's protest, apparently, had nothing to do with his timing. In the fashion industry, it would not do to be pushed around. INTERNATIONAL Tax Relief for Japan's Banks Sometimes the Japanese sound downright American. During the 1980's, Japanese finance companies, borrowing from commercial banks, went on a lending spree. Now the banks are awash in bad loans -- some say $400 billion worth -- and that's a big drag on a dragging economy. But the $140 billion economic stimulus package announced last week may provide some relief by allowing banks to start taking write-offs for bad loans. And there's a survival-of-the-fittest edge to it: The write-offs are expected to make strong banks stronger and weak ones weaker. Passing the Reins at NEC One executive who helped guide Japan on its blazing ride of recent decades is handing over the reins. Last week, Tadahiro Sekimoto, who built NEC into an electronics powerhouse, said he would step down in June. Until being eclipsed by Intel, NEC was the world's largest semiconductor maker, but problems have mounted for two years. Dr. Sekimoto, 67, had been criticized for doing too little about those problems -- which resulted in a $420 million loss in the latest fiscal year. His successor as president: Hisashi Kaneko, former head of American operations. So, as new leaders try to revive corporate America, are seeds being sown for Japan's return? THE ECONOMY A Billion Here, a Billion There . . . A Presidential aide said it all: "You try to be as bold as you can be and still get things done." There's really not much even the bold est leader can do about the nation's spending -- so much is set in bureaucratic stone. But when President Clinton sent his $1.52 trillion budget to Congress last week, there was some bold nibbling around the edges, which the White House said would trim the deficit to $176 billion for the '95 fiscal year, from a $302 billion projection a year ago. Even amid the nibbling, Mr. Clinton wants $14 billion for new investment initiatives in areas like science, technology and education. Pennies, yes, in such a budget -- but symbolic pennies. Shaking Off Inflation Fears After the scare on Feb. 4 -- when stocks plummeted after someone whispered "Inflation" in a crowded room -- the market kicked the snow off its boots last week and started climbing again, with the Dow up 23 for the week. Investors evidently decided inflation was at bay, an idea backed up by Friday's report that producer prices rose just 0.2 percent in January. Friday also brought word that January retail sales fell 0.5 percent, but everyone knew the weather was the culprit. Or at least those paying attention -- for the markets closed early because of the latest storm, the first early closing in nearly a decade. Health Care, the Numbers Game In the great health debate, the larger questions -- Will it save the nation money? Will everyone get medical care? -- are rapidly being obscured by semantic quibbles. Last week the Congressional Budget Office, charged with making sense of such matters, said the Clinton plan will indeed slow the growth of health spending but won't bring the deficit down for a decade, later than the President projects. But it also gave critics fuel by saying the program should be included in the Federal budget, while Mr. Clinton argues that it's just an extension of current health insurance. People aching for a doctor don't care which column of figures the cost appears in. More Pressure on Smokers The Administration stepped up the pressure on the nation's remaining smokers last week, backing legislation to ban smoking in all buildings open to the public. "The national mood has changed," said Representative Henry Waxman, Democrat of California. "The American public has awakened to the dangers of environmental tobacco smoke." And at a House hearing, the last six Surgeons General spoke up for the measure. But a Tobacco Institute spokesman branded the idea "social engineering on a vast scale" and said it "recalls the extremism of Prohibition."